Completing Form 1040X for Schedule C Changes

Making Changes to Schedule C on your Personal Tax Return

Tax forms with broken pencil
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You've filed your Schedule C for your small business taxes along with your personal tax return, but you've discovered a mistake. What do you do?  

Schedule C is a part of your personal tax return so you must first make the changes there. Then you can file an amended Form 1040, known as Form 1040X. 

When to File Form 1040X

You must have filed your original personal tax return before you can file Form 1040X. If you haven't, Form 1040X isn't necessary. You can just make the amendments to your Schedule C then use it to prepare and file your 1040. Make sure you've received confirmation from the IRS that they've received your Form 1040 before you submit an amended form.

You have three years from the date you filed your original return or two years from the date you paid any tax due on that return to file an amended form. These dates include any extensions you might have requested. Use whichever date is later.  

If you are getting a refund, the IRS suggests you wait until you receive the refund before filing an amended return. If you owe money, pay it as soon as possible to avoid additional fines and penalties. You can use IRS Direct Pay or your Debit or Credit card. Be sure to note what kind of payment you are making.

Types of Mistakes

If you made just a small mistake, you don't have to go to the trouble of amending your Schedule C. The IRS will fix basic math errors and it will contact you to tell you if you forgot to include a form or schedule. You can just send in the missing form at that time.

You do have to amend your Schedule C to correct your business income, deductions, or credits, however.  It's also a good idea to file an amended return if you missed something significant, like Part IV- Information on your vehicle.

Correcting Errors on Schedule C 

Amending an incorrect Schedule C and sending the changes to the IRS is a two-step process. First, you must make the changes to Schedule C, and this means preparing a new one. You don't have to mark it as amended in any way, and there's no additional special form for this.  

Recalculate everything on Schedule C after you've made the changes. For example, if you corrected your cost of goods sold, this will affect your total for net income. Now you can transfer the accurate information from your new Schedule C to your personal 1040. 

The IRS says:

Many taxpayers find the easiest way to figure the entries for Form 1040X is to make the changes in the margin of the original tax return and then transfer the numbers to their Form 1040X.

If you filed your business taxes using Schedule C-EZ, the process is simpler, because there isn't as much to change, but follow the same process as above.

Transfer Schedule C Changes to Your Tax Return

The most important thing to remember about completing Form 1040X is that you are only including information about changes. You're not repeating everything from your original Form 1040.

Of course, if those changes result in new totals, you'll have to redo the calculations for those new totals, but you aren't filing a completely new return. 

Here's the process for amending your personal tax return for changes after you've completed a new Schedule C.

  1. Complete the top part of Form 1040X. Be sure to check the correct box at the top of the page for the correct tax year you are amending.
  2. If the error changed the net profit or loss on line 31 of Schedule C, transfer this amount to line 12 of your original 1040 and recalculate your adjusted gross income. 
  3. Transfer the information for the change in adjusted gross income from your original 1040 to line 1 of your 1040X.
  4. Be sure to include detailed information in Section III of Form 1040X, explaining exactly what changes were made to Schedule C and why. Use a separate sheet of paper if necessary.
  1. Attach the revised Schedule C to Form 1040X, along with any explanations. Check to make sure everything is completed and the form is signed, then follow the instructions on where to send your amended tax return.

Your changes to Form 1040X might result in interest and penalties if you underpaid your taxes based on your inaccurate Form 1040. But don't include any interest or penalties on Form 1040X. The IRS will calculate these amounts if they apply and send you a bill.  

Correcting the Self-employment Tax Calculation

Don't forget about self-employment taxes. if your error in your Schedule C affected your net income, you will have to change the self-employment tax calculation on Schedule SE. Go through the same process for this form as you did for the Schedule C and make the changes on your 1040 form.

If you have any other errors on your personal tax return, you can make these corrections at the same time. 

E-File Is Not an Option

You must send the return and your amended Schedule C to a specific location depending on the reason you're submitting it and where you live. You can't e-file. See the Instructions for Form 1040X for details and a list of addresses.

You can also send your amended forms by private delivery service. A list of these services is also included in the instructions. 

A Final Tip: Check Your Tax Prep Software

If you're using personal tax software or an online tax preparation system, check to see if it includes Form 1040X. Most good programs do, and you can save a lot of time making the changes and recalculating this way. You'll still have to prepare a new Schedule C and Form 1040X, but the software should guide you through the process.